Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: Economic impact of COVID-19 will be enormous and difficult to estimate

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

The economic impact of the COVID-19 virus will be both enormous and difficult to estimate. To begin with, the entire world is catapulting into recession as governments scramble to contain the pandemic and international trade and travel shrivel. For B.C., this means reduced foreign demand for the goods and services we sell abroad and lower prices for many of our exports.

At the same time, the government’s decision to shutter of much of the consumer-facing services economy – including most retail businesses — is unprecedented. International air travel has essentially halted, delivering a blow to B.C.’s tourism industry just weeks before business normally would be expected to surge. Global supply chains for manufactured and advanced technology products have also been disrupted, hurting many local companies.

READ MORE: COVID-19 has been impacting Canadian economy since January

Amid the chaos, the Business Council recently modelled how the COVID-19 crisis and the measures being taken to manage it may affect the province’s economy in the months ahead. In doing so, we looked back at B.C.’s experience during the 2009 recession to get some sense of how sharp drops in consumer spending, investment and exports could impact various industries.

Using a bottom-up, industry-by-industry analysis, our base case forecast is that the province’s economy will contract by around 7% in 2020. That is roughly two-and-a-half times greater than the economic decline recorded in 2009. Most of the fall-off in economic activity will be concentrated in the March to June period, but some negative consequences are likely to linger into the summer and fall.

In developing this estimate, we assumed that much of the private sector service economy will remain closed for at least eight weeks. When shuttered businesses re-open, some restrictions likely will continue to apply. Bars, restaurants and other retail outlets may have new social-distancing rules, for example. And international air travel won’t be returning to “normal” for many months, in part because health officials will want to minimize the risk that the virus could be re-introduced to the population by visitors from elsewhere.

Which B.C. industries will suffer most from the toxic combination of a world-wide recession and the aggressive domestic measures being taken to contain the coronavirus?

Hardest hit will be air transportation, accommodation, restaurants and pubs, entertainment and leisure venues, film and television production, and other parts of the retail sector that are no longer operating (such as department, clothing and book stores). B.C.’s important tourism sector stands to be hammered over the next few months. Plenty of pain will also be felt in home-building, real estate, manufacturing, and business and professional services.

The current situation is extraordinary, and governments across the country are acting to shore up the quickly unraveling economy. Most of these efforts involve supporting workers and families experiencing job and income losses. That makes sense. But the plight of businesses cannot be ignored. If tens of thousands of B.C. companies are rendered insolvent in the face of collapsing revenues, the hard reality is that many furloughed workers won’t have jobs to return to. In addition, widespread business failures may destroy some of the economy’s productive capacity, notably in critical export sectors– with lasting negative implications for our prosperity.

In the past month, the federal and B.C. governments have announced a flurry of initiatives to support business, including a temporary wage subsidy program, tax deferrals, a concessionary lending program for small businesses, and a one-year reduction in B.C.’s school property tax for commercial and industrial businesses. At the same time, the Bank of Canada and federal financial authorities are moving to ensure the ongoing flow of credit to the private sector.

These are all positive steps. But more will be needed if policy-makers want to prevent the disappearance of large numbers of enterprises and the jobs they sustain. Canada should be looking at the bold measures adopted in Germany, Australia and the U.K. to backstop their business sectors – including major exporters — during the COVID-19 episode. The goal should be to enable companies that were commercially viable before the onset of the crisis to “bridge” the next 2-3 months until the worst of the pandemic — hopefully — is behind us.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

B.C. Budget 2020

Just Posted

Shane Ertmoed’s application for Escorted Temporary Absences was granted following a hearing May 4, 2021. (File photo)
Surrey child-killer an ‘average’ risk to sexually reoffend: Parole Board

Written reasons behind approval of Shane Ertmoed’s request for escorted absences shared

This map illustrates the number of active COVID-19 cases in Greater Vancouver from May 2 to 8, 2021. (BC Centre for Disease Control image)
Active COVID-19 cases in Delta down to six-week low

169 cases May 2 to 8; overall number in Fraser Health down for the third week in a row

Trucks line up for food during a drive-thru event on the PNE grounds last May. (Photo: Darryl Dyck/CP)
Drive-thru food truck fest coming to North Surrey Secondary lot

School a ‘great location – high traffic, very visible, and a very large parking lot’

Volunteers unload 1,000 meal kits at the Cloverdale Community Kitchen May 12. CCK was gifted the meals from Goodfood and distributed the entire truckload to the needy in less than 24 hours. (Photo: Submitted)
Cloverdale Community Kitchen distributes 1,000 meals in less than 24 hours

Meal kits went to charities in Surrey, Langley, White Rock

Prince Rupert was one of the first B.C. communities targeted for mass vaccination after a steep rise in infections. Grey area marks community-wide vaccine distribution. (B.C. Centre for Disease Control)
B.C. tracks big drop in COVID-19 infections after vaccination

Prince Rupert, Indigenous communities show improvement

The bodies of Carlo and Erick Fryer were discovered by a local couple walking on a remote forest road in Naramata on May 10. (Submitted)
Kamloops brothers identified as pair found dead near Penticton

The bodies of Carlo and Erick Fryer were discovered by a local couple walking

Municipal governments around B.C. have emergency authority to conduct meetings online, use mail voting and spend reserve funds on operation expenses. (Penticton Western News)
Online council meetings, mail-in voting option to be extended in B.C.

Proposed law makes municipal COVID-19 exceptions permanent

A nurse prepares a dose of the COVID-19 vaccine in Kelowna on Tuesday, March 16. (Phil McLachlan/Black Press)
British Columbians aged 20+ can book for vaccine Saturday, those 18+ on Sunday

‘We are also actively working to to incorporate the ages 12 to 17 into our immunization program’

The AstraZeneca-Oxford University vaccine. (AP/Eranga Jayawardena)
2nd person in B.C. diagnosed with rare blood clotting after AstraZeneca vaccine

The man, in his 40s, is currently receiving care at a hospital in the Fraser Health region

Brian Peach rescues ducklings from a storm drain in Smithers May 12. (Lauren L’Orsa video screen shot)
VIDEO: Smithers neighbours rescue ducklings from storm drain

Momma and babies made it safely back to the creek that runs behind Turner Way

Signage for ICBC, the Insurance Corporation of British Columbia, is shown in Victoria, B.C., on February 6, 2018. THE CANADIAN PRESS/Chad Hipolito
$150 refunds issued to eligible customers following ICBC’s switch to ‘enhanced care’

Savings amassed from the insurance policy change will lead to one-time rebates for close to 4 million customers

Lorna Seip touches up the mural on the wall at MRSS, working with students from the Rainbow Club. (Neil Corbett/The News)
Rainbow club puts message of inclusion at Maple Ridge School’s main entrance

Maple Ridge secondary grad says SOGI symbols are powerful

Police investigate a fatal 2011 shooting in a strip mall across from Central City Shopping Centre, which was deemed a gang hit. The Mayor’s Gang Task Force zeroed in on ways to reduce gang involvement and activity. (File photo)
COVID-19 could be a cause in public nature of B.C. gang violence: expert

Martin Bouchard says the pandemic has changed people’s routines and they aren’t getting out of their homes often, which could play a role in the brazen nature of shootings

Most Read